FEDERAL COURT OF AUSTRALIA

Toyota Motor Corporation Australia Limited v Williams (No 2) [2023] FCAFC 70

ORDERS

THE COURT ORDERS THAT:

1.    Paragraphs 18 and 19 of the orders made by the primary judge on 16 May 2022 (Initial Trial Orders) be set aside.

2.    The primary judge’s answers to the questions posed in Schedule 2 to the Initial Trial Orders be amended in accordance with the Schedule to these orders.

3.    Pursuant to s 33ZB(a) of the Federal Court of Australia Act 1976 (Cth), all group members, other than those who have opted out, are affected by the judgment of the Full Court and bound by these orders and the orders made by the Full Court on 27 March 2023.

4.    Each party bear its or their own costs of the appeal.

5.    Continuously from the date of these orders until further Court order (including an order by the Court in its original jurisdiction in this matter):

(a)    the respondents are to cause copies of the Full Court’s reasons for judgment delivered on 27 March 2023 (Full Court Reasons), the Full Court’s orders made on 27 March 2023 and these orders, to be displayed on the website maintained by the respondents’ solicitors in relation to this proceeding;

(b)    the District Registrar of the New South Wales Registry of the Federal Court of Australia shall cause the Full Court Reasons, the Full Court’s orders made on 27 March 2023 and these orders, to be posted on the class action page of the website of the Federal Court; and

(c)    the appellant is to cause copies of the Full Court Reasons, the Full Court’s orders made on 27 March 2023 and these orders, to be displayed on the appellant’s website, together with a link to the Federal Court website referred to in paragraph 5(b) above.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

SCHEDULE

Schedule 2

Questions Common to Group Members

References below to paragraphs of the reasons for judgment delivered by Justice Lee on 7 April 2022 (Reasons) and the reasons for judgment delivered by the Justices Moshinsky, Colvin and Stewart on 27 March 2023 (Full Court Reasons) are included for convenience only and do not, and should not be understood to, limit the Reasons or the Full Court Reasons.

The questions of law or fact common to the claims of the group members, and the answers to those questions, are:

Characteristics of the Relevant Vehicles

1.    Throughout the Relevant Period, was it the case that:

(a)    the DPF System in the Relevant Vehicles was not designed to function effectively during all reasonably expected conditions of normal operation and use in the Australian market, including the High Speed Driving Pattern;

A: Yes: Reasons, [15(6)], [15(7)].

(b)    in the event that the Relevant Vehicles were exposed to the High Speed Driving Pattern or the Earlier Countermeasures the DPF System was ineffective in preventing the formation of deposits on the DOC surface or coking within the DOC, which in turn prevented the DPF from regenerating effectively;

A: Yes: Reasons, [15(6)], [15(8)].

(c)    if the Relevant Vehicles were exposed to the High Speed Driving Pattern and/or the Earlier Countermeasures:

1.c.1    the DOC became blocked by deposits forming on the face of the DOC;

1.c.2    regeneration events failed to remove sufficient particulate matter from the DPF to prevent the DPF from becoming or remaining ‘full’ or blocked;

1.c.3    the DPF System failed to prevent the DPF from becoming ‘full’ or blocked;

1.c.4    the DOC and DPF did not function effectively;

1.c.5    the catalytic efficiency of the DOC was diminished;

1.c.6    the exhaust in the DPF did not reach a sufficiently high temperature to effect thermal oxidation;

A: Yes: Reasons, [15(8)].

(d)    if a Relevant Vehicle was exposed to the High Speed Driving Pattern, the Relevant Vehicles would experience one or more of the following consequences by reason of the Core Defect:

1.4.1    damage to the DOC;

1.4.2    the flow of unoxidized fuel through the DPF and the emission of white smoke from the vehicle’s exhaust during and immediately following regeneration;

1.4.3    the emission of excessive white smoke and foul-smelling exhaust from the vehicle’s exhaust during regeneration;

1.4.4    partial or complete blockage of the DPF;

1.4.5    the emission of foul-smelling exhaust from the exhaust pipe when the engine was on during and immediately following Automatic Regeneration;

1.4.6    the need to have the Relevant Vehicle inspected, serviced and/or repaired by a service engineer for the purpose of cleaning, repairing or replacing the DPF, the DPF System (or components thereof);

1.4.7    the need to have the Relevant Vehicle inspected, serviced and/or repaired more regularly than would be required absent the Core Defect;

1.4.8    the need to programme the ECM more often than would be required absent the Core Defect; or

1.4.9    the display of DPF Notifications on an excessive number of occasions and/or for an excessive period of time;

1.4.10    blockage of the Additional Injector due to carbon deposits on its tip;

1.4.11    the Additional Injector causes deposits forming on the face of the DOC, causing white smoke; and

1.4.12    an increase in fuel consumption and decrease in fuel economy.

A: Yes: Reasons, [59].

(e)    by reason of the fact that the Core Defect was present in each Relevant Vehicle at the time it was supplied, each Relevant Vehicle had a propensity to experience one or more of the Defect Consequences;

A: Yes: Reasons, [62]-[63].

2.    Were all Relevant Vehicles subject to the statutory guarantee as to acceptable quality in s 54(1) of the Australian Consumer Law?

A: Yes: Reasons, [155], [162].

3.    Can the question of whether the Relevant Vehicles were not of acceptable quality within the meaning of s 54(2) of the Australian Consumer Law be determined on a common basis?

A: Yes: Reasons, [212]; Full Court Reasons, [51].

4.    Were the Relevant Vehicles not of acceptable quality within the meaning of s 54(2) of the Australian Consumer Law?

A: Yes, the Relevant Vehicles were not of acceptable quality within the meaning of s 54(2) of the ACL: Reasons, [173]-[213]; Full Court Reasons, [65].

5.    Was the 2020 Field Fix effective in, and will it continue to be effective in, remedying the Core Defect and its consequences in all Relevant Vehicles to which the 2020 Field Fix has been applied?

A: Yes: Reasons, [15(10)].

Vehicle Representations

6.    During the Relevant Period, did TMCA represent to the public at large that the Relevant Vehicles:

(a)    were, or were part of model lines that were, in their design and manufacturing:

6.a.1    not defective;

6.a.2    of good quality;

6.a.3    reliable;

6.a.4    durable;

6.a.5    suitable for use in any driving environment; and

(b)    provided, or were part of model lines that provided, a driving and/or passenger experience that was comfortable?

A: Yes: Reasons, [215(1)(a) and (b)].

7.    Was each Vehicle Representation made continuously by TMCA throughout the Relevant Period?

A: Yes: Reasons, [217].

8.    Did TMCA fail to correct or qualify the Vehicle Representations at any time during the Relevant Period?

A: Yes: Reasons, [217].

9.    Were the Vehicle Representations:

(a)    misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law;

(b)    false and misleading representations in contravention of ss 29(1)(a) or 29(1)(g) of the Australian Consumer Law;

(c)    liable to mislead the public as to the nature, characteristics, and/or suitability for purpose of the Relevant Vehicles, in contravention of s 33 of the Australian Consumer Law?

A: Yes: Reasons, [233]; Full Court Reasons, [65].

Future Vehicle Representations

10.    During the Relevant Period, did TMCA represent to the public at large that the Relevant Vehicles:

(a)    would be, or were part of model lines that would be, in their design and manufacturing:

10.a.1    not defective;

10.a.2    of good quality;

10.a.3    reliable;

10.a.4    durable;

10.a.5    suitable for use in any driving environment; and

(b)    would provide, or were part of model lines that would provide, a driving and/or passenger experience that was comfortable?

A: Yes: Reasons, [215(1)(c) and (d)].

11.    Was each Future Vehicle Representation made continuously by TMCA throughout the Relevant Period?

A: Yes: Reasons, [217].

12.    Did TMCA have reasonable grounds for making the Future Vehicle Representations?

A: No: Reasons, [243]; Full Court Reasons, [65].

13.    Did TMCA fail to correct or qualify the Future Vehicle Representations at any time during the Relevant Period?

A: Yes: Reasons, [217].

14.    Were the Future Vehicle Representations:

(a)    misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law;

(b)    false and misleading representations in contravention of ss 29(1)(a) or 29(1)(g) of the Australian Consumer Law;

(c)    liable to mislead the public as to the nature, characteristics, and/or suitability for purpose of the Relevant Vehicles, in contravention of s 33 of the Australian Consumer Law?

A: Yes: Reasons, [223]-[225], [234], [243]; Full Court Reasons, [65].

DPF System Representations

15.    During the Relevant Period, did TMCA represent to the public at large that the Relevant Vehicles contained, or were part of model lines that contained, a DPF System that, in its design and manufacturing:

(a)    was not defective;

(b)    was of good quality;

(c)    was reliable;

(d)    was durable;

(e)    did not have a propensity to fail;

(f)    completed a regeneration cycle with sufficient regularity to prevent the DPF from becoming partially or completely blocked?

A: Yes: Reasons, [215(2)(a)-(f)].

16.    Was each DPF System Representation made continuously by TMCA throughout the Relevant Period?

A: Yes: Reasons, [217].

17.    Did TMCA fail to correct or qualify the DPF System Representations at any time during the Relevant Period?

A: Yes: Reasons, [217].

18.    Were the DPF System Representations:

(a)    misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law;

(b)    false and misleading representations in contravention of ss 29(1)(a) or 29(1)(g) of the Australian Consumer Law;

(c)    liable to mislead the public as to the nature, characteristics, and/or suitability for purpose of the Relevant Vehicles, in contravention of s 33 of the Australian Consumer Law?

A: Yes: Reasons, [232].

Future DPF Representations

19.    During the Relevant Period, did TMCA represent to the public at large that the Relevant Vehicles contained, or were part of model lines that contained, a DPF System that:

(a)    would not be defective;

(b)    would be of good quality;

(c)    would be reliable;

(d)    would be durable;

(e)    would not have a propensity to fail;

(f)    would complete a regeneration cycle with sufficient regularity to prevent the DPF from become partially or completely blocked?

A: Yes: Reasons, [215(2)(g)-(l)].

20.    Was each Future DPF System Representation made continuously by TMCA throughout the Relevant Period?

A: Yes: Reasons, [217].

21.    Did TMCA have reasonable grounds for making the Future DPF System Representations?

A: No: Reasons, [243].

22.    Did TMCA fail to correct or qualify the Future DPF System Representations at any time during the Relevant Period?

A: Yes: Reasons, [217].

23.    Were the Future DPF System Representations:

(a)    misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law;

(b)    false and misleading representations in contravention of ss 29(1)(a) or 29(1)(g) of the Australian Consumer Law;

(c)    liable to mislead the public as to the nature, characteristics, and/or suitability for purpose of the Relevant Vehicles, in contravention of s 33 of the Australian Consumer Law?

A: Yes: Reasons, [223]-[225], [234], [243].

Omissions conduct

24.    During the Relevant Period, did TMCA fail to disclose, or disclose adequately, to prospective purchasers of, or persons acquiring, a Relevant Vehicle:

(a)    the existence, nature and extent of the Core Defect in the Relevant Vehicles;

(b)    the Defect Consequences;

(c)    that the Core Defect had not been remedied; and

(d)    from February 2016, TMCA knew of the Core Defect and its consequences?

A: Yes: Reasons, [244]-[246].

25.    Was the Omissions Conduct:

(a)    misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law;

(b)    liable to mislead the public as to the nature, characteristics, and/or suitability for purpose of the Relevant Vehicles, in contravention of s 33 of the Australian Consumer Law?

A: Yes: Reasons, [247]-[250].

Damages under ACL s 272(1)(a)

26.    If the Relevant Vehicles failed to comply with the guarantee of acceptable quality under s 54 of the Australian Consumer Law, has that failure resulted in a reduction in the value of those vehicles?

A: Yes, the failure to comply with the guarantee of acceptable quality resulted in a reduction in value of all Relevant Vehicles of 17.5%, meaning that their true value was 82.5% of their Average Retail Price: Reasons, [330]-[331], [391], [393]-[394], [446(1)]. 10% (before taking into account the availability of the 2020 Field Fix). The amount of the reduction in value (taking into account the availability of the 2020 Field Fix) is yet to be determined: Full Court Reasons, [312], [317]-[319].

27.    Are Group Members entitled to recover from TMCA any damages of the kind described in s 272(1)(a) of the Australian Consumer Law (Reduction in Value Damages)?

A: Yes, Group Members who have not opted out are entitled to recover Reduction in Value Damages in respect of Entire Period Relevant Vehicles (other than 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles) from TMCA. It is not possible to determine how such damages should be assessed or distributed in respect of Partial Period Relevant Vehicles except on an individualised basis, having regard to the individual circumstances of owners of Partial Period Relevant Vehicles: Reasons, [330]-[331], [391], [393]-[394], [427], [432], [436], [446(1)]. The entitlement (if any) of Group Members to Reduction in Value Damages in respect of 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles is yet to be determined: Reasons, [163]. Not appropriate to answer at this stage. It is preferable that this question be answered following the remitter.

28.    In respect of any Reduction in Value Damages that Group Members are entitled to recover from TMCA, is it appropriate to:

(a)    make an award of damages for Group Members pursuant to s 33Z(1)(e) of the Federal Court of Australia Act 1976 (Cth) (FCAA);

A: Yes, it is appropriate to make an award of Reduction in Value Damages to Group Members in respect of Entire Period Relevant Vehicles (other than 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles) pursuant to s 33Z(1)(e) of the FCAA: Reasons, [446]-[447]. Yet to be determined: Full Court Reasons, [321].

(b)    alternatively, award damages in an aggregate amount for Group Members pursuant to s 33Z(1)(f) of the FCAA?

A: No, it is not appropriate to make an award of Reduction in Value Damages to Group Members in an aggregate amount pursuant to s 33Z(1)(f) of the FCAA: Reasons, [443].

29.    If it is appropriate to make an award of damages pursuant to ss 33Z(1)(e) or 33Z(1)(f) of the FCAA in respect of any damages of the kind described in s 272(1)(a) of the Australian Consumer Law that Group Members may be entitled to recover from TMCA:

(a)    what is the appropriate form of the order awarding damages;

(b)    what is the appropriate quantum of damages to be awarded?

A: The following formula or methodology is to be applied to determine the ‘Reduction in Value Damages’ awarded pursuant to s 33Z(1)(e) in respect of Entire Period Relevant Vehicles (other than 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles):

(a)    the true value of the Relevant Vehicle is to be determined by applying a ‘reduction in value percentage’ of 17.5% to the Average Retail Price for that model line and build year of Relevant Vehicle, meaning that each of the Relevant Vehicles has a true value, for the purposes of s 272(1)(a), that is 82.5% of the Average Retail Price for that model line and build year of Relevant Vehicle;

(b)    for each Relevant Vehicle, the lower of: (i) the Price Paid and (ii) the Average Retail Price for that that model line and build year of Relevant Vehicle is to be determined, with the lower of those two prices being the applicable comparator for the purposes of applying this formula; and

(c)    for each Relevant Vehicle, the amount recoverable under s 272(1)(a) by the relevant Group Member in respect of the vehicle is the amount (if any) by which the applicable comparator price in respect of the vehicle (as determined in (b) above) exceeds the true value of the vehicle (as calculated in (a) above), reduced by an amount equal to any payment(s) made by the respondent to the Group Member in respect of that vehicle prior to the date of these orders for the reduction in value of the vehicle and/or for the difference between the price the Group Member paid to acquire the vehicle and the price at which they traded it in to the respondent or sold it, as part of a redress programme conducted by the respondent: Reasons, [405]-[408], [446]. Yet to be determined: Full Court Reasons, [321].

Damages under ACL s 272(1)(b)

30.    If the Relevant Vehicles failed to comply with the guarantee of acceptable quality under s 54 of the Australian Consumer Law, have Group Members suffered loss or damage arising from any excess GST they incurred because of that failure?

A: Yes: Reasons, [465]-[474], [492]; Full Court Reasons, [136], [319].

31.    Are Group Members entitled to recover from TMCA damages pursuant to s 272(1)(b) of the Australian Consumer Law in respect of loss or damage arising from any excess GST they incurred because of the Relevant Vehicles failing to comply with the guarantee under s 54 of the Australian Consumer Law (GST Damages)?

A: Yes, Group Members who have not opted out are entitled to recover excess GST calculated as 10% of the Reduction in Value Damages in respect of any Entire Period Relevant Vehicle (including 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles falling within that description). It is not possible to determine how such damages should be assessed or distributed in respect of Partial Period Relevant Vehicles except on an individualised basis: Reasons, [492]-[493]. Not appropriate to answer at this stage. It is preferable that this question be answered following the remitter.

32.    In respect of any GST Damages that Group Members are entitled to recover from TMCA, is it appropriate to:

(a)    make an award of damages for Group Members pursuant to s 33Z(1)(e) of the FCAA; or

A: Yes, it is appropriate to award GST Damages to Group Members who have not opted out in respect of Entire Period Relevant Vehicles (including 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles falling within that description) pursuant to s 33Z(1)(e) of the FCAA: Reasons, [493]. Yet to be determined: Full Court Reasons, [321].

(b)    award damages in an aggregate amount for Group Members pursuant to s 33Z(1)(f) of the FCAA?

A: No: Reasons, [443], [493].

33.    If it is appropriate to make an award of damages pursuant to ss 33Z(1)(e) or 33Z(1)(f) of the FCAA in respect of any GST Damages that Group Members are entitled to recover from TMCA:

(a)    what is the appropriate form of the order awarding damages;

(b)    what is the appropriate quantum of damages to be awarded?

A: The following formula or methodology is to be applied to determine the GST Damages awarded pursuant to s 33Z(1)(e) in respect of Entire Period Relevant Vehicles (including the 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles):

(a)    determine the amount of Reduction in Value Damages recoverable by the relevant Group Member in respect of the vehicle (or, in respect of 2020 Field Fix Relevant Vehicles and Post Relevant Period Replaced Vehicles, the amount of Reduction in Value Damages that would be recoverable by the Group Member in respect of the vehicle had an entitlement to such damages been established under this judgment) in accordance with the answer to common question 29 above;

(b)    the amount of GST Damages to which the Group Member is entitled in respect of the vehicle is equal to 10% of the amount in item (a) above: Reasons, [492]. Yet to be determined: Full Court Reasons, [321].

Pre-judgment interest

34.    Are Group Members entitled to recover pre-judgment interest on any damages awarded?

A: Yes, any Group Member awarded damages is entitled to pre-judgment interest on that damages award at the rates specified in paragraph 2.2 of the Interest on Judgments Practice Note (GPN-INT) published by the Federal Court of Australia: Reasons, [494].

35.    Is it appropriate to make an order or orders pursuant to ss 33Z(1)(e) or 33Z(1)(f) of the FCAA that includes pre-judgment interest in respect of any Reduction in Value Damages and/or GST Damages?

A: Yes, it is appropriate to make an award of pre-judgment interest on any Reduction in Value Damages and/or GST Damages pursuant to s 33Z(1)(e) of the FCAA to the Group Members entitled to receive those Reduction in Value Damages and/or GST Damages: Reasons, [494]. Yet to be determined: Full Court Reasons, [321].

Mitigation

36.    Do Group Members have a duty to mitigate their losses in respect of damages of the kind described in s 272(1)(a) and/or 272(1)(b) of the Australian Consumer Law?

A: No: Reasons, [497], [507].

37.    Even assuming that Group Members did have some obligation to “mitigate” damage, was it unreasonable for Group Members not to take up the invitation to have the 2020 Field Fix applied in circumstances where TMCA asserts that to take up that invitation has the effect, under s 271(6) of the ACL, of extinguishing altogether any entitlement to damages under s 272(1)(a) of the ACL?

A: No: Reasons, [508].

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    These reasons for judgment deal with issues concerning consequential orders and costs in light of the judgment of the Full Court dated 27 March 2023: Toyota Motor Corporation Australia Limited v Williams [2023] FCAFC 50 (Full Court Reasons). These reasons should be read together with the Full Court Reasons. We adopt the abbreviations used in the Full Court Reasons.

2    In the Full Court’s orders of 27 March 2023, the parties were given the opportunity to file written submissions, and responding written submissions, on costs and consequential issues. Accordingly, on 10 April 2023, each of Toyota and the respondents filed written submissions on these issues. Subsequently, on 24 April 2023, each of Toyota and the respondents filed responding written submissions. In some respects, the differences between the parties were narrowed in the responding written submissions. The main issue that remains between the parties concerns costs, both of the appeal proceeding and of the proceeding at first instance. In relation to consequential orders, there remain some differences between the parties as to the amendments that should be made to the primary judge’s answers to the common questions, as set out in Schedule 2 to the primary judge’s orders dated 16 May 2022 (Initial Trial Orders).

3    We will deal first with issues relating to consequential orders, and then deal with costs.

Consequential orders

4    The Full Court’s orders dated 27 March 2023 included orders that: the appeal be allowed; paragraphs 1 to 5 of the Initial Trial Orders be set aside; and the matter be remitted for re-assessment of reduction in value damages under ss 271(1) and 272(1)(a) of the Australian Consumer Law and damages for excess GST under ss 271(1) and 272(1)(b) of the Australian Consumer Law in accordance with the Full Court Reasons.

5    It is agreed between the parties that, in light of the Full Court Reasons, paragraphs 18 and 19 of the Initial Trial Orders should also be set aside. We will make an order to this effect.

6    The parties agree that group members need to be bound by the Full Court’s judgment and orders. In their initial written submissions, the parties proposed different wording to achieve this. However, in its responding written submissions, Toyota stated that it was not opposed to the respondents’ formulation. We will therefore make an order in substance as proposed by the respondents. We will make an order in the following terms:

Pursuant to s 33ZB(a) of the Federal Court of Australia Act 1976 (Cth), all group members, other than those who have opted out, are affected by the judgment of the Full Court and bound by these orders and the orders made by the Full Court on 27 March 2023.

7    The parties agree that there should be an order publicising the Full Court’s judgment. Toyota put forward a form of order in its initial written submissions. In their responding written submissions, the respondents state that they do not oppose the order proposed by Toyota. Accordingly, we will make an order in the following terms:

5.    Continuously from the date of these orders until further Court order:

(a)    the respondents are to cause copies of the Full Court’s reasons for judgment delivered on 27 March 2023 (Full Court Reasons), the Full Court’s orders made on 27 March 2023 and these orders, to be displayed on the website maintained by the respondents’ solicitors in relation to this proceeding;

(b)    the District Registrar of the New South Wales Registry of the Federal Court of Australia shall cause the Full Court Reasons, the Full Court’s orders made on 27 March 2023 and these orders, to be posted on the class action page of the website of the Federal Court; and

(c)    the appellant is to cause copies of the Full Court Reasons, the Full Court’s orders made on 27 March 2023 and these orders, to be displayed on the appellant’s website, together with a link to the Federal Court website referred to in paragraph 5(b) above.

8    The parties agree that some of the primary judge’s answers to the common questions, set out in Schedule 2 to the Initial Trial Orders, need to be amended in light of the Full Court Reasons. The parties have proposed different techniques for achieving this. On balance, we consider the appropriate course to be to make an order that the primary judge’s answers to the questions posed in Schedule 2 to the Initial Trial Orders be amended in accordance with a schedule to the orders that we will make, and to set out the amendments (in a marked-up form) in that schedule to our orders. We do not consider it necessary to set aside paragraph 14 of the Initial Trial Orders, which stated that the questions of law or fact common to the claims of the group members be answered as set out in Schedule 2 to the Initial Trial Orders. Those answers remain in place save to the extent that they are amended by our orders.

9    There is a large measure of agreement between the parties as to the amendments to be made to the answers to the common questions in light of the Full Court Reasons. It is unnecessary to discuss the agreed amendments in these reasons. There remains disagreement in relation to the answers to the following questions: 26, 27, 31 and 34. In relation to those questions, our views are as follows:

(a)    In relation to question 26, we do not fully adopt either Toyota’s formulation or the respondents’ formulation. The question and answer that we consider reflects the Full Court Reasons are as follows:

26. If the Relevant Vehicles failed to comply with the guarantee of acceptable quality under s 54 of the Australian Consumer Law, has that failure resulted in a reduction in the value of those vehicles?

A: Yes, the failure to comply with the guarantee of acceptable quality resulted in a reduction in value of all Relevant Vehicles of 10% (before taking into account the availability of the 2020 Field Fix). The amount of the reduction in value (taking into account the availability of the 2020 Field Fix) is yet to be determined: Full Court Reasons, [312], [317]-[319].

(b)    In relation to question 27, which asks whether group members are entitled to recover from Toyota any damages of the kind described in s 272(1)(a) of the Australian Consumer Law, the respondents propose certain additions to the answer of the primary judge, while Toyota proposes deleting the whole of the primary judge’s answer and inserting “Yet to be determined”. The answer formulated by the primary judge incorporates a number of defined expressions that refer to the date when the Initial Trial Orders were made. It is possible that these expressions will need to be revised following the remitter. In these circumstances, we consider the preferable course to be to delete the primary judge’s answer and substitute: “Not appropriate to answer at this stage. It is preferable that this question be answered following the remitter.”

(c)    In relation to question 31, which asks whether group members are entitled to recover from Toyota damages pursuant to s 272(1)(b) of the Australian Consumer Law in respect of loss or damage arising from any excess GST they incurred because of the relevant vehicles failing to comply with the guarantee under s 54 of the Australian Consumer Law, the respondents propose certain additions to the answer of the primary judge, while Toyota proposes deleting the primary judge’s answer and inserting “Yet to be determined”. As with question 27, the answer to question 31 formulated by the primary judge incorporates a number of defined expressions that refer to the date when the Initial Trial Orders were made. It is possible that these expressions will need to be revised following the remitter. In these circumstances, we consider the preferable course to be to delete the primary judge’s answer and substitute: “Not appropriate to answer at this stage. It is preferable that this question be answered following the remitter.”

(d)    In relation to question 34, which asks whether group members are entitled to recover pre-judgment interest on any damages awarded, the only difference between the parties is whether a reference to the Full Court Reasons should be added (as proposed by the respondents). We do not consider it necessary to add a reference to the Full Court Reasons.

10    We note for completeness that Toyota proposed the amendment of Schedule 1 to the Initial Trial Orders, which contains definitions, to delete definitions that are no longer used. We do not consider it necessary to do so. The definitions that are no longer used will simply have no work to do.

Costs

Costs of the appeal

11    The positions of the parties regarding the costs of the appeal are as follows. Toyota seeks an order for costs in its favour. The respondents submit that each party should bear its or their own costs.

12    The applicable principles are well established. In Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158, the Full Court summarised these principles at [9]-[11]:

9    Section 43(3)(e) of the Federal Court of Australia Act 1976 (Cth) provides that an award of costs may be made in favour of, or against, a party whether or not that party is successful in the proceeding. The approach usually taken is that costs follow the outcome of an appeal: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; see also Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [303]; Oshlack v Richmond River Council (1998) 193 CLR 72 at [66]-[68].

10    In Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370, Dowsett, Middleton and Gilmour JJ, after referring to Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 and State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174, said at [11] that these decisions treat the success or failure of the relevant party as being the starting point in consideration of the question of costs, but contemplate at least three distinct categories of situation in which a successful party might be deprived of costs, or even ordered to pay the costs of the other side. These were identified as follows:

One such category is where the applicant has been only partially successful in that it has not obtained all of the relief sought. The second category is where a party has succeeded in obtaining the relief sought, but has not succeeded on all bases (factual or legal) upon which it sought such relief. Of course, it is possible that a particular outcome will fall into both categories. A third category involves consideration of the successful party’s conduct of the case.

11    After referring to the decision of Finkelstein and Gordon JJ in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107, Dowsett, Middleton and Gilmour JJ in Queensland North Australia then said at [18]:

[Section 43 of the Federal Court of Australia Act] does not mention costs following the event. In Ruddock, Bowen Investments and Sportsbet, the Court proceeded on the basis that ordinarily, the successful party may reasonably expect to receive its costs, whether that outcome be described as costs following the “event” or otherwise. The question of costs is within the Court’s discretion. As we have said, relevant factors include the extent of a party’s success, the extent of its success or failure on individual issues and its conduct of the proceedings.

13    The above passage was approved by the Full Court in Caffitaly System S.P.A. v One Collective Group Pty Ltd (No 2) [2021] FCAFC 164 at [5].

14    Toyota submits that it should be awarded its costs of the appeal given its success. It notes that the Full Court allowed the appeal, set aside the damages orders made by the primary judge and ordered a remittal.

15    In our view, this is a case where each party enjoyed a substantial measure of success, such that the appropriate order is that each party bear its or their own costs of the appeal. While it is true that the appeal was allowed, the damages orders made by the primary judge were set aside and the matter was remitted for further hearing, the construction and conceptual approach adopted by the Full Court was not that contended for by Toyota and is less advantageous for Toyota than the construction and approach it propounded: see the Full Court Reasons at [67], [87]-[89], [125]-[126], [127]-[129].

16    Further, in the circumstances of this appeal, which occupied three hearing days, we consider it appropriate to have regard to the success or failure of the parties on particular issues. The respondents were successful in relation to the first three appeal grounds, which related to liability, and in relation to most of the third group of appeal grounds, which concerned the assessment of reduction in value damages. The third group of appeal grounds occupied a considerable amount of time during the hearing of the appeal. Overall, we consider there to be a broad equivalence between the measure of success enjoyed by each side.

17    Having regard to the above, we consider it appropriate that each party bear its or their own costs of the appeal.

Costs of the proceeding at first instance

18    The primary judge made an order (paragraph 6 of the Initial Trial Orders) that Toyota pay the applicants’ costs of the proceeding up until the date of the Initial Trial Orders as agreed, as determined following a reference process described in those orders, or as otherwise fixed by an order of the Court. Toyota contends that the primary judge’s costs order should be set aside, and the question of costs of the first instance proceeding up to the date of the Initial Trial Orders be determined following the conclusion of the remittal ordered by the Full Court. The respondents contend that the primary judge’s costs order should not be disturbed.

19    In support of its position, Toyota points to several cases where an order along the lines it proposes has been made. Further, Toyota submits that determination of the question of costs of the first instance proceeding ought to be deferred because, even though liability has been decided in favour of the respondents (the applicants at first instance), it may be appropriate for Toyota to be awarded its costs in respect of certain aspects (eg, the evidence of Mr Cuthbert) in light of the Full Court Reasons. Further, Toyota notes that substantive issues such as whether damages can be assessed on an aggregate basis remain to be determined on remittal.

20    In our view, the primary judge’s costs order remains appropriate and should not be disturbed. Although the Full Court adopted a different construction and conceptual approach to that of the primary judge, which will have the effect of reducing the reduction in value damages to be awarded, it remains the case that the respondents (the applicants at first instance) have been overwhelmingly successful in relation to the issues agitated during the initial trial. Further, although the Full Court took a different view to that of the primary judge in relation to some of the evidence, we do not consider this to affect the appropriateness of the primary judge’s costs order.

21    While there remain issues to be determined on remitter, including whether or not an aggregate damages award can or should be made, in our view it is not necessary to wait until the determination of those issues before deciding the question of the costs of the proceeding at first instance up to the date of the Initial Trial Orders. Putting this another way, in our view, the outcome of those issues will not have a bearing on the appropriate costs order for the proceeding at first instance up to the date of the Initial Trial Orders.

22    Accordingly, we do not propose to disturb the primary judge’s costs order.

Associate:

Dated:    12 May 2023